David Freedom's Vision of 2011 and Beyond

The world’s banking system (which is the western banking system) has the same problems that existed before the collapse in 2008, with two exceptions: 1) The problems are much larger; and 2) They have been shifted to the public. Since 2008, the Fed has loaded up on all sorts of “toxic debt”, including Fannie & Freddie (MBS), FHA, US Treasuries ($900B) and many more. Newly issued US debt ($2T annual deficit) is being purchased/monetized by the Fed and those holdings along with all the previously mentioned toxins are now backed by the US Treasury. As of October 20, 2010 the Fed’s balance sheet exceeded $2.3 trillion ($832b in Treasury debt). What’s the Fed’s plan to manage this liability in the event of a dollar collapse? Suffices to say, the US citizen is now the largest debtor in the history of the world.

Who’s Holding the Bag?

The Bernanke recently stated publically that: “Under a scenario in which short-term interest rates rise very significantly, it’s possible that there might come a period where we don’t remit anything to the Treasury for a couple of years. That would be I think a worst-case scenario.” You need to understand that all of the Treasuries purchased by the Fed will soon be ‘under-water’ which would result in the Fed being insolvent. This new twist allows the Fed to pass losses to the Treasury via interest payments (or lack of) on the US Treasury Bonds (i.e., paid by the US citizens). In simple terms, the US citizens are now the holders (back-stop) for the massive amounts of debt, debt that CANNOT be paid under any circumstance. That means the next insolvency crisis, which is a certainty, will be one of a sovereign nature. This fact changes significantly how the markets will react.

What Ignites the Next Blaze?

The potential list is long, so I’ll mention only a few. All of these things could happen in the next couple years, the first of which will start a fire the likes of which we’ve never witnessed. It could be US municipal defaults, policy shifts from the Chinese, a EU crisis, or an expanded war in the Middle East. I could go into detail about the crisis-solution agenda, but I’ll leave that for another day.

The US Market

QE2 is set to expire in June 2011 and The US Congress will need to address the debt ceiling by March. Expect the debt ceiling to be revised up in the near future and QE3 will probably be masked under a different name, but make no mistake, it’ll be money printing all the same. My understanding is that the banking system intends to continue increasing credit/debt throughout the world.

Through the next month or two (through Feb) we’ll likely see a continued rise in commodities and US equities. Picking a line in the sand is tricky business though, so making preparations now is prudent. As food and energy prices rise, nations will feel the sting of money printing (already happening). This will only increase the number of civil protests (RIOTS). Developing nations will feel the brunt of higher inflation, which will lead to various measures to control price increases (e.g., Russia’s recent announcement of food controls or COMEX margin hikes). The increased costs of commodities will be a drag on the world’s economy as well as the attempted policies to control the rise. As a result, I expect significant volatility throughout 2011. The global slowdown will lead to a drop in US markets by the middle of the year, giving the Fed impetus for more money printing. For anyone still expecting a return to ‘normal’, 2011 will be a wake-up call.

Beyond 2011

Similar to the “Choose-Your-Own-Ending” books (remember those?), the Fed has gone too far down the easing path to save the USD as it exists today. In the short-term, the USD is still being managed by the Fed, but this is only a temporary mirage. For the sake of this article, let’s assume they try (though highly unlikely) to restore confidence in the USD. The Fed could allow the bad debt to default (written off). As defaults rage the USD would skyrocket, due to massive liquidations and to a lesser extent, the safety trade. However, as a result of massive defaults, US banks would immediately be unable to honor deposits. Of course, the government could “back stop”/guarantee all the banks, but then we’re back into easing which puts the currency at risk. In addition to the banking collapse, The Fed and US Treasury (as the Fed’s back-stop) would default. Since this would be a sovereign default, and the USD is stock of that sovereign entity, the USD would collapse. There is one possibility in reviving the USD, albeit under a new/old system. That new system would require a huge revaluation in US gold holdings to be used as backing for the new USD. Jim Rickards has done some good work on the process and price of gold to make it a reality. Whether this happens or not remains to be seen.

As we work through this crisis, there will be a combination of defaults and austerity. Pensions will be slashed, state assets will be sold to the highest bidder (at massively undervalued prices), while new and existing taxes are imposed on the citizenry. Government services will be slashed and newly privatized assets will increase all types of expenses – things like water, energy and transportation. See the IMF blueprint for how this works, or ask an Argentine.

Civil unrest will increase dramatically, in places never before expected. Tensions between nations will rise and war will inevitably breakout throughout the globe. Sound gloomy? This too shall pass.

What to do?

If you have wealth to protect, a minimum of 30% should be held in gold, silver or productive land. I do not advocate 100% into PMs. Although the outcome of the USD is abundantly clear, current laws enforce the USD which should be held for expenses, emergencies, purchases and so forth. Rather, I suggest 30% be stored in physical gold and silver, 30% in cash and 30% in growth. Within the growth category you will have many paper options and should look to exceed the rate of inflation. As a further precaution, it’s advantageous to hold assets and citizenship outside of your primary residence.

The issues we face today are extremely complex and although the outcome appears certain, the specific events and timeline are impossible to predict. By maintaining a sound portfolio, you will afford yourself the most protection against a variety of financial outcomes.

Non-Financial

You should have water and food stocks along with necessary supplies, such as water filters, alternative heat sources, community networks and other essentials for surviving disasters. In all likelihood, systems will continue to function, but on a temporary basis, these items will keep you comfortable (relatively).

Learn who you are and what’s important to you. Find the meaning of your existence and strive to fulfill your purpose. Live in harmony with your surroundings and community. Love God and men. Don’t follow any institution and think for yourself. When making charitable donations, give them personally. I advise reading the bible (KJV), starting with the New Testament. Most importantly promote and vigorously protect freewill. If the Euro crashes, reduce USD positions!

All your advice is good. But, "I advise reading the bible (KJV), starting with the New Testament," is the best advice I will ever get on ZH, and there is a lot. Thanks for being honest enough to say it.

Even amogst the money handlers in Manhattan there is a lot of empty retail space; even on the UES section of Madison Avenue. This grand theft is not trickling down very far as the top of the pyramid knows this is the last easy bite of the apple...

So lots of shops closing of all sizes but internet retailing and home delivery with its cost and productivity gains should be a real boon for a contracting economy.

There will be no shortages of any consumer products, businesses will be super-keen to supply you with everything and anything you want. No need for any panic, relax, just focus on getting your finances sorted

You write, "You should have water and food ..supplies, such as water filters, alternative heat sources, community networks and other essentials for surviving disasters."

You appear to be preparing for a Meteoroid Attack, not a financial meltdown! A Great Depression i fear we face 'just' means a BIG contraction in the economy. But farms will still be farming, food and water supplies still going, all business sectors will still be there and you'll be able to get anything you want, when you want it, that's the beauty of the free market.

So no need to panic like there's been a 300% rise in long-life foods. Totally un-neccessary. But the Gold and Silver coins (and even cash) stored is a more practical and sane solution. See you in the shops, not the bomb shelter ok

"The world’s banking ...problems ....have been shifted to the public."

SHIFTY lot bankers...... and it still takes everyone in Washington to help them with the shovelling... so how about shifting it back, some reverse engineering, call it the 'Shit Right Back At You Banking Reform Bill'

Good advice: have water and food and basic preparedness supplies. Better advice: have enough of these things that you can share them with people who have not prepared (i.e. the majority). Best advice: improve yourself to better serve your community.

While the Mad Max scenario seems unlikely, resource shortages, fewer gov't services, more gov't intrusion, and greater social tensions are certain. Under these conditions, a closet full of automatic weapons and massive quantities of ammunition won't help. What will help is close ties to your community. As a practical matter, this is what will make you feel---and be---safe. As a philosophical matter, a sense of community is what everyone longs for, though few recognize it.

True, but you need to start early. Planning on bugging out to New Zealand soon myself. But the visa process is long and arduous. Plan on a bare minimum of 9 months. In my case, due to only minor complications, it has taken 18 months. From what I understand that is true of other countries (except the US, where you can just walk in).

the country has been looted . there is no such thing as 'sovereign debt' , it's just made-up shit by the banks. the I.M.F. is a bunch of criminals who loot countries. get rid of these people, restore sound money issued by the Treasury / NO MORE DEBT-BASED MONEY ! / NO MORE INTEREST PAID TO DAMN "_ _ _ " BANKERS (you fill in the blank, if I do it, I'll get junked, even tho it's the truth.)

"Don’t follow any institution and think for yourself." is all good, but you lost me with "I advise reading the bible, starting with the New Testament." Religion in general is not known for promoting indpendent thinking and free will.

good article, but avoid the KJB at all costs (personally, I do believe in an omnipresent and infinite God with an intelligence and energy beyond our comprehension - but religion is pure bullshit)... watch the first third of this film if you are a "Christian"

Yes, watch the film and you will discover the agenda - To take the focus off the Jewish world bankers and place it on their gentile accomplices and underlings, and on Christianity rather than Jewish Zionism.

The entire purpose of Zietgeist was to create a subtle, psychological diversion of attention off Jews by leaving them out of the story.

Religion aside, the KJV is one of the hallmarks of Western literature. And though I don't consider myself a Christian by any stretch, there is a lot of sublime truth contained therein. If you're OPEN-MINDED that is.

While i'm a long term gold bull and generally dour character i don't really buy the 'mad max' scenario.

This article caters for a niche market and i respect that view, but i doubt stockpiling guns and ammo is wise use of your money - i know cos i've done it - you look at the boxes of tins and 7.62mm rounds and think 'why did i piss away 100 bucks on that?'

there is little to stop a decline in the standard of living for most and folks will have to suck it up, as per fracking usual.

i think if you want the banksters strung up we'll have to let al-qaeda take over because they are the only ones who'd do it - and mainly cos of their dislike of jews rather than anger at goldman sachs.

If you have the means, I say diversify! Guns and ammo too, because who knows what will happen. I do not...

I have PMs, guns & ammo and am out of debt. I hope you are right re no 'Mad Max' and NOT right about Al Qaeda hanging the banksters (I would hope we could handle that one). A Ferfal / Argentina scenario would be bad, but our country could handle it and probably recover... Chastened, probably vowing "never again", but of course it will happen again.

If anyone hasn't been there, it's an excellent blog on living in a country (Argentina) that collapses from 1st world to 3rd world. Life stays the same, everyone just gets poorer; crime goes way up, infrastructure become intermittent

I read it, read it twice ........ loved this article & have sent it to all my friends & family........ maybe they'll believe it. At the risk of looking stupid & being junked, I'm going to ask; just who's responsible for this holy mess we are in ?! The Federal Reserve Bank, Wall St. & the U.S. Government combined ? Who's been most responsible for ruining this country ? ! Is it that we're just all dumb sheeple or was there really a sinister plot to drain the wealth out of it. When I was growing up most everyone had a nice little paid off home, money in a savings account & a car & a job !!! ........ where did it all go so wrong ! ? NIXON? ROBERT RUBIN ? BILL CLINTON ? BUSH 2 ? ........ god, what's to become of our kids & grandkids . I feel like personally going after someone with my pitchfork, just not sure who !!

All part of Barry's bag that gets put on Bush's back. In 2006 it was 8.5 trillion. IN another year it will be double that unless a stop is put to it by the republican house. The pressure to expand the debt will be enourmous. The democrats will pull out the same crap that they got Bush to sign on to in 2008, like TARP.

Oh, and Hank Paulson was forced on to Bush in 2006 by the Democrats in the House and Senate, another Democrat Goldman tool. Probably the only "republican" that they could find from Goldman. Bush tried with two other treasury secretaries to reign in spending, but the Wall Street Debt mongers dealt with that through their democrat tools.

Then, by God, he should have gone on TV, used his bully pulpit, and been outspoken about what was happening -- explained it over and over until people understood. Should have been all over the networks, even to the point of taking them over to get his message out. He didn't do enough.

I wish I could agree 100% but, Bush did fail us, pretty much throughout his term, re spending. But, clearly the O is worse.

...

Re lynnybee's lament, all three of her suspects are at fault and caused this. Check, check, check. But WE, as a people, an electorate, are at fault for electing critters who promise us a free lunch. Ain't no such thing, as we are learning yet again.

I too enjoyed the article. One of the things which is sorely lacking is the ability to explain what's going on to the average person. Many have tried. I have yet to see something which really gets the message across, though a few come close.

As to who is responsible, well, frankly there are a host of actors in this play. One can name various key people, and various acts. But I'm of the opinion that it was absolutely inevitable, from a macro view of macro-economics. We're in the financialization phase (I.e. trying to make money out of money), and that always comes crashing down. Always has, always will, unless certain steps are taken, which aren't popular among the ruling elite.

The good news is that things will get better after the ashes have cleared. It won't be immediate, and getting there is going to be tough. Nor will all make it. But our children and grandchildren will get to go through this cycle again. Hopefully they'll have learned a little more by the time they hit the financialization phase again.

Anyway, that's the most useful view of things that I've found. I hope that helps.